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Friday, 4 November 2011

One of the more interesting aspects of IP licensing is the presence of basic contractual constructs that have no, or little, direct anchor in the law. Sublicensing is one such example, but this Kat will remain mum on this, because there will be an IPKat-sponsored programme on the subject next month here. An even more acute example is the notion of a "sole licence". On this, the Kat wants to share several thoughts.

We are all familiar with "exclusive" and "non-exclusive" licences. Many IP statutes make explicit reference to each of these two types of licence. In the main, an exclusive licence means that the right conferred upon a single licensee is exclusive, even as to the rightsholder, while a non-exclusive licence contemplates multiple licensees and does not exclude use by the licensor (although there is nothing in principle that prevents such a restriction if the licence somehow contained such a provision).

Sometimes a specific IP statute will include a definition of each type of licence; in other instances, case law does the heavy task of providing definitions. This combination of statutory and judicial recognition of exclusive and non-exclusive licences frequently then serves as the basis for fixing certain rights in favour of the licensee. Most notably, an exclusive licensee will often be entitled to sue for infringement (either alone or jointly with the IP rightsholder, depending on the local law), while a non-exclusive licensee will not enjoy a right of suit.

So does this mean that IP licences can be simply divided into two categories--exclusive and non-exclusive? Well, not exactly. As anyone who deals with IP licensing comes to know, there is a third category of IP licence that sometimes shows up--the so-called "sole licence". This Kat has looked long and hard, but he has not found any IP statute that explicitly refers to, much less defines, a "sole licence". [That said, readers are invited to bring any such examples to our attention.]

Even assuming that no such statutory treatment exists for a "sole licence",the fact remains that the notion of a "sole licence" is sometimes part of an IP licence. Generally, a sole licence means that there is only one licensee; however, unlike an exclusive licence, in a sole licence, the licensor reserves to itself the right to use the licensed IP as well. We say, "generally means" because, ultimately, a sole licence means only that for which the four corners of the licence make provision. A carefully drafted an IP sole licence will include a provision such as that above.

But, not infrequently, the licence will simply refer to a "sole licence" without
further defining the term. What is one supposed to do in such a situation? In particular, when the governing law provides only for an "exclusive" or "non-exclusive" licence, how is one meant to construe a sole licence? We reject at the outset the improbable result that a sole licence is neither an exclusive nor a non-exclusive licence, but is some version of the licensing netherworld, with all the uncertainties that befall anyone or anything unlucky enough to fall into that middle category.

Accordingly, we are left with two choices. In favour of categorizing a sole licence as an exclusive licence, one can point to the fact that if the purpose is to regulate who can sue for infringement, it should not matter whether the licensor is prevented from making use of the licensed IP right or not. However, if the purpose is to ensure that the "exclusive licensee" is functionally equivalent to an assignee, i.e., a person who receives all, or nearly all, the rights of the assignor, the rationale for categorizing a sole licence as a form of exclusive licence is less firm. Moreover, as matter of statutory construction, if the definition of an exclusive licence provides that the right of use excludes the licensor, then, on its face, a sole licence does not meet that statutory requirement.

This Kat has his own tongue--he is not sure of the better position. Readers are invited to provide guidance.

4 comments:

In Portuguese Law, you can find the following rules regarding licenses:

Article 32CONTRACTUAL LICENCES (...)5 The licence shall be understood to be non-exclusive.6 An exclusive licence is one in which the holder of the right renounces the faculty to grant other licences for the rights covered by the licence while it remains in effect.7 The grant of an exclusive exploitation licence does not prevent the holder from also directly exploiting the right in the licence, unless otherwise stipulated.

As you can see, solo licenses are referred to in the no. 7. The same number stipulates that unless it is expressly referred to in the contract, an exclusive license will not exclude the owner of exploring the right.

Therefore, I see solo licenses as exclusive licenses.

However, I would not i) connect the exclusive / non exclusive licences with the right to sue for infringement. IMO, such is another dimension of the agreement, which can be both present in exclusive (solo or not) as well as in non exclusive non licenses; ii) use a criteria that would make the exclusive licensee equivalent to an assignee or iii) use a definition of an exclusive licence that excludes everyone but the licensee.

I would categorize a sole license as an exclusive licence, simply due to the fact that a exclusive licence excludes the possibility of licensing the right to any other third party and that is what happens in a solo licence.

I can't offer a statutory citation which defines what a sole licence is, but a quick Google trawl through a number of UK and US legal sites (eg here and here) which offer a definition all adopt the rightsholder + single licensee model. Furthermore the WIPO Joint Recommendation Concerning Trademark Licenses dated Oct 2000 Article I defines a sole license as follows: "(x) “sole license” means a license which is only granted to one licensee and excludes the holder from granting licenses to any other person, but does not exclude the holder from using the mark;"

Neil, in the absence of statutory guidance, how the word "sole" is interpreted by the court could vary from case to case, depending on the factual background. Therefore I don't think you can categorise a sole licence in the black and white way you describe.

Having said that, I have taught licensing to practitioners for many years and often ask attendees for their understanding of the difference between a sole licence and an exclusive licence. Those students who put their hands up almost invariably give the answer that you and I would expect, ie that a sole licensor retains the right to exploit, whereas an exclusive licensor doesn't.

Some indirect and rather weak statutory support for this approach appears in some Queensland, Australia legislation. Section 19 of the Property Agents and Motor Dealers Act 2000 (as amended)explains the distinction between an exclusive agency and a sole agency. If a house is sold, the exclusive agent will get commission, even if he didn't introduce the buyer, but the sole agent will only get commission if he introduces the buyer. At the very least, this supports the notion that sole is less than exclusive. There may be some mileage in research estate agency / realtor law to see if there is a similar approach in other countries.

You haven't mentioned semi-exclusive licences, which are another flavour that I have seen on several occasions. Typically, it is like a sole licence, except that if the licensor decides not to exploit in a particular territory himself, he can appoint someone else to do so. In other words there will be a maximum of two parties exploiting in any territory.

A reader has drawn the IPKat's attention to the following extract from the iconic copyright treatise, Copinger, 16th ed, para. 5-207, as follows:

"C. Exclusive Licences (i) Introduction A sole licence is often understood to be one where the licence is coupled with a contractual promise that the licensor will not grant a licence to any other party, the licensor himself remaining free to exercise the licensed rights. In contrast, a sole and exclusive licence, or, more shortly, an exclusive licence, is one where there is included a promise that the licensor will not himself exercise any of the rights the subject of the licence. As has been seen, as a matter of general law an exclusive licence, whether oral or written, confers no proprietary interest in the copyright, merely the usual incidents of a licence but coupled with contractual remedies against the licensor in the event of any breach of exclusivity provisions..."

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